Land as a factor of Production

Land is defined in economics as a free gift of nature.

CHARACTERISTICS OF LAND

1. Land is a gift of nature
2. Land is geographically immobile
3. Land is important in mining and quarrying activities.
4. Land is subject to the law of diminishing returns
5. The reward for land is rent

IMPORTANCE OF LAND

1. It provides areas when agricultural activities can be carried
2. It provides areas for forestry and wild- life resources

• Land is important in mining and quarrying activities

1. Land is important in production activity because it provides the sites and materials for production purposes. It is important in building and construction
2. Bodies of water such as rivers, lakes and seas, which are part of land are used for transport purposes.

LAW OF DIMINISHING RETURNS OR VARIABLE PROPORTION

This law refers to a short run production situation. The law of diminishing returns state that ‘as more of the variable factor is added to other factors which are constant, ontput will eventually increase at a decreasing rate’.

According to the hypothesis of diminishing returns, if increasing quantities of a variable factor are appied to given units of fixed factors, output might increase at first but a time will come when each additional unit of variable factor will add less to total output than previous units.

Diminishing returns set in when more of labour is added to fixed factors ( land and capital). A good example can be found in the agricultural sector. When more labour is employed to work on land, total output will increase up to a point when any addition of labour will result in increase in output at a decreasing rate.

The law of Diminishing returns follows three stages, these are:

1. Increasing returns
2. Constant returns
3. Decreasing returns

Example

FIXED INPUT	VARIABLE INPUT LAB	TOTAL OUTPUT	AVERAGE OUTPUT	MARGINAL OUTPUT
2	1	5	5	——
2	2	14	7	9
2	3	25	8.3	11
2	4	32	8	7
2	5	37	7.5	5
2	6	42	7	5
2	7	41	5.8	-1
2	8	35	4.3	-6